The Fed’s Beige Book is an anecdotal review of the US economy. This month’s beige book was paid by the Dallas Fed. Perusing the comments, the overall view is indicative of a slowing in the economy. Price rises are starting to see come pushback from consumers, with some discounting. Labor is growing slightly.
Overall Economic Activity
- National economic activity expanded from early April to mid-May, with varying conditions across industries and Districts.
- Most Districts reported slight or modest growth; two noted no change.
- Retail spending was flat to slightly up, with lower discretionary spending and heightened price sensitivity.
- Auto sales were roughly flat, with some manufacturers offering incentives.
- Travel and tourism strengthened, but hospitality outlooks for summer were mixed.
- Nonfinancial services demand rose; transportation services varied.
- Solid demand for nonprofit and community services; manufacturing was flat to up, with two Districts reporting declines.
- Tight credit standards and high interest rates constrained lending growth.
- Housing demand rose modestly; single-family construction increased despite rising rates impacting sales.
- Commercial real estate conditions softened.
- Stable energy activity; mixed agricultural reports with easing drought conditions but concerns over farm finances.
- Overall outlooks grew more pessimistic due to rising uncertainty and greater downside risks.
Labor Markets
- Employment rose slightly overall, with eight Districts reporting modest job gains and four reporting no change.
- Improved labor availability, though some shortages remained in select industries.
- Decreased employee turnover; increased employer bargaining power.
- Mixed hiring plans, with some Districts expecting modest job gains and others noting a pullback due to weaker business demand and economic uncertainty.
- Wage growth remained moderate, with some Districts reporting modest increases and normalization to pre-pandemic levels.
Prices
- Prices increased modestly.
- Consumer pushback against price increases led to smaller profit margins.
- Retailers offered discounts to entice customers.
- Continued increase in input costs, particularly insurance; some noted price declines in certain construction materials and manufacturing raw materials.
- Expected modest price growth in the near term.
Highlights by Federal Reserve District
- Boston: Flat economic activity; modest price increases; slow-to-moderate wage growth; weakened real estate activity; cautious optimism.
- New York: Slight economic growth; solid labor market; slight consumer spending increase; solid housing market with low inventory; modest selling price increases.
- Philadelphia: Slight business activity growth; slight employment increase; modest wage and price inflation; slight growth in existing home sales; positive overall outlook.
- Cleveland: Slight business activity increase; slower growth due to higher interest rates; modest decline in consumer spending; stabilized wages, input costs, and selling prices.
- Richmond: Modest economic growth; moderate consumer spending; increased import activity; no change in manufacturing and nonfinancial services demand.
- Atlanta: Slight economic growth; stabilized labor markets; eased wage pressures; healthy consumer demand; strong tourism; mixed commercial real estate conditions.
- Chicago: Slight economic growth; modest employment and construction activity; slight increase in business and consumer spending; moderate price and wage increases; tightened financial conditions.
- St. Louis: Slight economic growth; slightly pessimistic outlook.
- Minneapolis: Slight economic growth; softened labor demand; eased wage pressures; increased consumer spending; slightly improved commercial and residential construction.
- Kansas City: Moderate economic expansion; moderate household spending; modest job gains; slightly increased prices.
- Dallas: Flat to slightly increased economic activity; growth in manufacturing, banking, and energy; flat nonfinancial services activity; slight decline in retail sales.
- San Francisco: Largely unchanged economic activity and employment levels; slight price, wage, and retail sales growth; weakened services and residential real estate activity; stable commercial real estate and financial sector conditions; slight increase in demand for manufactured products; mixed agricultural conditions.
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Stocks are still lower with the Dow -0.91%. The Nasdaq is the best index but off lows with a decline of -0.25%. The S&P is down -0.51%.
US yields remain higher with the 2-year just below 5.0%
- 2-year yield 4.980%, +2.4 basis points
- 5-year yield 4.632%, +5.9 these points
- 10 year yield 4.611%, +7.0 basis points
- 30-year yield 4.732%, +7.7 basis points
The USDs rise is stalling and consolidating:
- EURUSD reached the 100 day MA target at 1.0810, but remains just above the lows from last week near 1.0803 and the swing area between 1.0795 and 1.08067. The current price is trading at 1.0813.
- USDJPY extended to new highs up to 157.698. That is still below the May 1 high at 157.99. The current price trades just off the high at 157.64.
- GBPUSD would below its 200 hour moving out at 1.2727. Recall from last Friday, the price stalled at that level. Moving below increased the bearish bias. THere is support at 1.2699 and then down at a swing area between 1.2675 to 1.26858.
This article was written by Greg Michalowski at www.forexlive.com. Source